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Restraint of trade clauses in the spotlight

In Epichealth Pty Ltd v Peng-Kung Yang [2015] VSC 516, an interlocutory injunction was granted by the Supreme Court of Victoria restraining the defendant (a medical practitioner) from providing any services associated with carrying on a general medical clinic within a 10-kilometre exclusion zone.

Factual Background. The contract, by which the defendant was engaged as an independent contractor, required that the defendant provide six months' notice of termination and included a restraint of trade clause that applied a standard cascading definition of the restricted geographical area and restraint period. The defendant provided the plaintiff with notice of termination; however, prior to the expiry of the six-month notice period, the defendant ceased providing services to the plaintiff, and, in breach of the restraint clause, the defendant commenced operation as a sole medical practitioner and sole director of a medical clinic six kilometres from the plaintiff's clinic.

Decision. In determining whether to grant the injunction, Justice Dixon applied the relevant principles articulated by the High Court in Australian Broadcasting Corporation v O'Neill. Firstly, his honour held that the plaintiff had prima facie demonstrated the defendant was in breach of the termination and restraint clauses of the contract. Secondly, in the circumstances, his honour determined damages would be an inadequate remedy given the complexity involved in assessing loss attributed to customer loyalty to a medical business. Finally, his honour held that the balance of convenience weighed in favour of the plaintiff, noting that the likelihood of the defendant facing financial hardship was a commercial risk accepted by the defendant which did not justify permanently depriving the plaintiff of the protection the restraint clause provided to its business.

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